Southwest Market Region Industrial Project Spending 2006 Gap Measurement

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Researched by Industrial Info Resources (Sugar Land, Texas). The Southwest Market Region consisting of Texas, Louisiana, Oklahoma and Arkansas, is generally ranked among the top industrial spenders by region across the United States and Canada due to its large population of power, refining and petrochemical plant sites. Looking at planned capital spending for 2006, the region’s outlook continues to improve as the difference in the gap measurement for 2006 has decreased by nearly $1 billion dollars compared to 2005.

Gap measurement refers to a method of benchmarking active capital projects and capital spending forecasts against projects that have been cancelled, delayed or put on hold on a monthly basis. A decrease in the gap measurement, such as what is currently being forecast for the Southwest market region, could indicate a rising confidence in the region’s overall economy. The Power industry is expected to represent the largest portion of the fallout in active project activity within the region at over $5.8 billion in nearly 40 projects that were cancelled or placed on hold. This is a substantially more fallout than any other industry, where the two closest followers each totaled barely more than $600 million in cancelled or delayed projects.

Click on the image at right to view the Gap Measurement Chart for the Southwest Region

Despite the extreme number of cancellations, the Power Industry is still scheduled to begin construction on an estimated $8.6 billion from 121 capital projects within the region during 2006, making it the largest spender. Closely following the Power Industry as the second largest spender, is the Industrial Manufacturing Industry with $6.3 billion and 155 projects. An explosion of LNG terminal project development in the region will propel the Terminal Industry to become the third largest spender of the year at $5.2 billion, although it will accomplish this from just 39 projects making its average project total investment value (TIV) nearly $135 million, significantly higher than the Power industry’s average TIV of just $71 million.

Click on the image at right to view the Southwest Region Project Spending Analysis Chart.

In comparing gap measurement based on construction starts by month, the largest portion of project cancellations or fallout generally takes place during the summer months. Most large projects are scheduled for a construction start during a late spring or early summer months when warmer weather is typically more favorable to civil construction starts.

Considering the volatile costs of both oil and natural gas last year, and the dependency on the two as feedstock within the region, it is encouraging that the gap measurement for 2006 is smaller than the previous year. The summer months are approaching and it is difficult to tell what lies ahead for the cost of crude oil, but an increase is all but certain. Most major natural gas pipelines in the region have been repaired and brought back online after significant disruptions late last summer during the hurricane season and transportation should play a minimal role in any cost increases.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.